10 Common Challenges Faced by Entrepreneurs

Entrepreneurship offers potentially great rewards, financial and otherwise, but getting there usually involves overcoming major challenges. Maybe you’re unable to attract funding, people don’t believe in your vision, or you can’t find a reliable manufacturer. 

Whatever the challenge, the key to getting past it is often preparation, so you know what to expect and how to respond. Lucky for you, this handy guide lays 10 of the most common challenges faced by entrepreneurs and the best ways to overcome them and succeed. 

1. Coming Up with a Business Idea

Many people have entrepreneurial aspirations but have trouble coming up with a workable business idea. If you ask entrepreneurs, you’ll find that many came up with their idea in an attempt to solve their own problem. They had a problem – their commute was too long; their family too unconnected; or what have you – and decided to create their own solution.

James Dyson grew frustrated with vacuum cleaners that always lost their suction power, so he built a bagless vacuum designed to never lose suction and became an entrepreneurial legend. 

Some entrepreneurs do what they know best. An expert in software development might create a new tool to address a specific market need. 

Others choose to do what they love, which might mean turning a hobby into a business. A teacher might start an online education company. Or a young artist, like Walt Disney, might turn his passion for drawing animated characters into a global entertainment empire. 

Some entrepreneurs look to fill a market gap. The market could be a certain location or a product designed for a certain group of customers. Maybe your part of town lacks a pizza place, barbershop or car rental service, presenting an opportunity. 

2. Raising Startup Funds

Arguably, the biggest challenge for entrepreneurs is coming up with adequate funding. Investors rarely commit significant capital to startups, and even bank and federal SBA financing can be elusive without a solid business plan and some of your own funds. 

Some entrepreneurs look to family and friends for funding, but that can be risky business. You’re risking personal relationships if your business fails and those people lose money.

Often, entrepreneurs tap into all of their own assets, including savings accounts and even their homes. Sometimes they use personal credit cards to cover startup expenses.

Your best bet is to use a combination of funding types, perhaps starting with your own funds and an SBA loan. Another option is crowdfunding, enabling people to invest small amounts in exchange for a free product or small share of ownership in your company.

3. Product-Market Fit

Determining your target market is often a significant challenge. You’ll need to find out which people will be willing to buy your product and their reasons for doing so. 

Online surveys and focus groups are good ways to gain some knowledge about the market, but you won’t know for sure until you launch and start selling. 

Some entrepreneurs start with what’s called a minimally viable product (MVP), which is an early product iteration that might still have a few rough edges. If people are willing to buy this early version they could provide invaluable feedback that will help you improve your product.  

This strategy often works well for tech products, with so many people wanting to be the first to try the latest gadget. 

If your product is not something that can have an MVP, you might instead place an initial order for a limited quantity of your product, reducing your investment commitment. 

4. Creating a Marketing Strategy

The information gathered from market research should shape your marketing strategy. By now you should have some idea of where to target your marketing. For example, if your target market tends to be younger, you’re more likely to find them on TikTok rather than Facebook.

You should also know why these people will buy your product and the needs it fulfills. Your marketing message should then highlight how your product addresses this issue and why your solution is better than the competition. 

Continue doing market research to better understand your customers and adapt over time. You’ll also want to gauge the impact of your marketing, then do more of what works and less of what does not.

5. Cash Flow Management

Many entrepreneurs focus on revenue, but in business, cash flow is king. Be sure to monitor and manage your cash flow so that you can keep the business running and growing. Managing cash flow involves several steps. First of all, watch your costs and reduce them whenever possible.

Meanwhile, smartly manage your accounts receivable (funds owed to you) and payable (funds you owe). Keep in mind that a pile of unpaid invoices is cash that’s not in your pocket. 

But in terms of payables, you may want to delay paying some of your bills as long as you can without incurring penalties. It’s wise to negotiate favorable terms with vendors and suppliers.

Arguably the most important part of cash flow management is inventory management. Holding too much inventory can weigh down your business. Holding too little inventory can prevent you from fulfilling orders in a timely manner.

Take the time to examine your sales record and find the optimal level of inventory to maximize your cash in hand while being able to meet customer demand. Certain software tools can help you determine your optimal inventory based on past sales and might be worth a look. 

6. Time Management

Starting and running a business will take up more time than you can imagine and you’ll be taking on a wide variety of tasks. In the early days, you probably won’t be able to afford much staff, so you’ll have to wear many hats, as they say. 

Effective time management is therefore critical. Prioritize tasks so that you complete the most important ones first, and always leave time in your schedule for the unexpected. Entrepreneurship is full of surprises, and you’ll need to be ready for anything.

7. Employee Management

When you start hiring employees you’ll encounter a new set of challenges, from paperwork to payroll. You’ll have to monitor employee hours and performance and sometimes deal with fraught situations. 

Good leadership and management requires a gentle touch that you’ll probably need to learn as you go. For your human resource and payroll management needs, your best bet may be to hire a payroll service that also handles HR. The time you save will be well worth the cost.

8. Delegating

Many entrepreneurs view their business as their baby and want to control everything. But at some point you’ll need to trust others to handle certain tasks so that you can most effectively use your time. Often, entrepreneurs find one key person with skills that complement their own and entrust that person with much of their business. 

Taking a leap of faith and delegating to employees may be difficult, but if done right it’s a great recipe for success. Doing everything yourself is often a good way to fail; teamwork is usually what drives business success. 

9. Staying Motivated

Encountering all these challenges is tough, as is working endless hours. Many entrepreneurs get burned out and wonder why they got into this work in the first place. Everyone has their own way to self-motivate, but entrepreneurs are usually best motivated by their vision.

In developing your own business idea you likely formed a detailed vision for your company, your product, and your success. Entrepreneurs are visionaries by nature, so keeping your eye on the prize is likely to drive you to keep working hard. 

You’re building something of value to everyday people and the overall economy, not to mention yourself and your staff. Let that motivate you to overcome anything and everything. 

10. Accepting the Need to Pivot Strategy

One of the hardest things for an entrepreneur to do is accept failure. The market is telling them their initial vision was flawed, and simply won’t work. But only by quickly accepting this lesson will an entrepreneur be able to pivot, adapt and succeed. 

Maybe your marketing off or your target demographic changed, or a new product came to market that’s better than yours. When this happens, the worst thing you can do is forge ahead on the same path. If your existing approach is not working, it’s time to pivot. This could mean a change in strategy or a complete overhaul of your product and business. 

While it’s hard to accept that your efforts have fallen short, being married to a failing strategy is a good way to fail. Being open to change gives you a much greater chance of success.

In Closing

The challenges of entrepreneurship are many, but so are the rewards. The key to overcoming challenges is to be prepared for them and to continuously learn, from others and from your own experience. Even if your business ultimately fails, that doesn’t mean that you should no longer pursue your dream of being an entrepreneur. 

Many of the world’s most successful entrepreneurs failed again and again before they hit on the recipe for success. Being unafraid of challenges and willing to learn from failure is the surest way to fight through the tough times and eventually achieve your dream.